Banking royal commission: Kenneth Hayne unveils super hearing line-up

AMP, AustralianSuper and IOOF have all been summoned to appear at the fifth round of royal commission hearings.

*Fairfax Pool Images* The Royal Commission into the Financial Services Industry. 12 February 2018. The Age News. Photo: Eddie Jim. ( The Commissioner Kenneth Hayne )

Australia’s biggest for-profit superannuation manager AMP and the country’s largest fund, AustralianSuper, have both been called up for the royal commission’s fifth round of hearings into misconduct in the nation’s retirement savings.

Financial advice powerhouse IOOF, along with 13 other retail and industry superannuation managers, has also been called to give evidence at the royal commission hearings starting in early August.

The competence of Australia’s financial regulators, the Australian Prudential Regulation Authority and the Australian Securities & Investments Commission, will also be probed, after the duo faced intense and escalating criticism over their failures to safeguard the country’s nest eggs from fee gouging and dismal returns.

Kenneth Hayne’s royal commission released the line-up for its investigation into the $2.6 trillion super system, which will probe both the bank-run retail super sector and the union-and-employer-backed industry fund sector, earlier this afternoon.

Among the for-profit funds to be grilled on governance arrangements and dealings between trustees and financial advisers will be AMP, which manages about $120bn in funds, Mercer, Suncorp, National Australia Bank’s MLC, Commonwealth Bank’s Colonial First State and ANZ’s Onepath businesses and IOOF.

Notably, Westpac — the only major bank to remain committed to its superannuation business — has avoided a call up to give evidence at the royal commission.

On the not-for-profit industry side, the $130bn AustralianSuper will be grilled alongside the $40bn Hostplus, Sunsuper and Cbus’ United Super brands. Catholic Super will also be grilled, with questions likely to take place over its failed merger with the Australian Catholic Superannuation and Retirement Fund, which was scuppered after disagreement over who would chair the merged entity. The Electricity Supply Industry Superannuation fund will also be questioned, while QSuper will be grilled on its dealings with Aboriginal and Torres Strait Islander members.

Directors of both industry and retail funds are expected to face a grilling on governance issues, whether the boards have acted in the best interests of members rather than union groups or shareholders, why failed mergers did not proceed and dealings between related parties and subsidiaries. As revealed by The Australian over the last two weeks, the royal commission has asked some of the largest super funds in the country to explain their union sponsorship arrangements, whether the boards have acted in the best interests of members rather than union groups or shareholders, why failed mergers did not proceed and dealings between related parties and subsidiaries.

The Australian today revealed the royal commission in the past few weeks has probed AMP and the major banks on fees being charged to super members where no service has been given, the performance — or entrenched underperformance — of investment platforms, the retail sector’s tardy approach to the legally required MySuper transition to low-fee funds, and high fees being charged for low returns.

The Productivity Commission’s draft report said APRA and ASIC “need to become member champions — confidently and effectively policing trustee conduct, and collecting and using more comprehensive and member-relevant data”.

“Regulations (and regulators) focus too much on funds rather than members. Sub-par data and disclosure inhibit accountability to members and regulators,” it said. The report made eight recommendations touching directly on the regulators, including fixing the gaps in data, enforcing better disclosure to fund members and investigating aborted fund mergers.

The royal commission has been targeting the same issues at all the major retail super providers, and has collected piles of board minutes and thousands of documents that detail specific fees levied on customers and investment performance data.

The Productivity Commission’s landmark inquiry on the superannuation system, which recently released a draft report, has been informing much of Mr Hayne’s inquiry. The damning report into superannuation found entrenched overcharging and underperformance in the for-profit fund sector, a tail of underperforming trade union funds that refuse to merge despite it being in their members’ best interests, and an industry happy to preside over a system that acts as an “unlucky lottery” for many savers.

Under the law, superannuation trustees in charge of managing the retirement savings of members must act in the best interests of their members. However, for-profit companies listed on the stockmarket, such as AMP and the big four banks, also have a fiduciary duty to act in their shareholders best interests.

The latest data from SuperRatings shows super funds run by CBA, ANZ, NAB, Westpac, AMP and IOOF — another large retail super manager — were consistently among the worst performers over the past 15 years. Retail fund fees have been twice as high as non-profit industry fund fees.

Meanwhile retail super providers have been sucking out profits from their superannuation divisions at the same time returns have underperformed.